Article ID Journal Published Year Pages File Type
5089463 Journal of Banking & Finance 2013 19 Pages PDF
Abstract
► In a comprehensive study, we compare top-down with bottom-up approaches to price CDO contracts. ► The market practice of delta hedging CDO tranches with CDS contracts failed during the crisis. ► Even for the best models daily losses can exceed 5% of the tranche notional. ► No top-down models is able to outperform the Student-t copula, which is the best bottom-up model.
Keywords
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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Hedging structured credit products during the credit crisis: A horse race of 10 models
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